Chinese ODI soars towards $200bn

The only way is up: a customer heads to a duty-free shop in downtown ShanghaCredit:
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17 February 2017 • 5:00pm

Dai Tian

Chinese overseas direct investment (ODI) has surged in advanced manufacturing and service sectors, with 2016 mega-deals including the acquisitions of Kuka, Skyscanner and Odeon Cinemas.

China’s ODI is estimated to have soared 40 per cent to a record $189bn in 2016 from the previous year, according to a study released by the US consultancy Rhodium Group and the Berlin-based Mercator Institute for China Studies.

Europe emerged as a key investment destination as China’s investments in the European Union jumped 77 per cent to more than €35bn, with Germany accounting for €11bn – 31 per cent of the total – according to the report.

Chinese investors have shown particular interest in advanced manufacturing and service sectors, it noted, citing last year’s mega-deals including the acquisition of Kuka, Skyscanner and the Odeon cinema chain.

The regulator plans to further enhance the accountability and risk control of overseas acquisitions by state-owned enterprises

Such trends coincided with China’s latest move to warn against state-owned enterprises’ outbound investment in mining or heavily polluting industries.

Although official full-year ODI data is not yet available, Rhodium Group expects the increase will cement “China’s role as one of the top direct investor nations globally”.

However, the report also noted that China is implementing “more stringent reviews” for certain outbound investment deals, with the goal of cracking down on illegitimate transactions, which are to blame for putting increasing downward pressure on the renminbi, the Chinese currency.

The country’s top state-owned assets regulator plans to further enhance the accountability and risk control of overseas acquisitions by state-owned enterprises, according to documents released last month.

Unreasonable cases may still exist as outbound investments soar, and such risks, once unguarded, may backfire on both sides.

Xu Shaoshi, head of the National Development and Reform Commission, has said it is therefore necessary to appeal for prudent investments. He told a press conference in January that “overall support for Chinese firms going global has not and will not change”.

This article was originally produced and published by China Daily. View the original article at www.chinadaily.com